ZTE: ‘Major operating activities of the Company have ceased’ due to BIS component ban

ZTE Corp. has hunkered down in hopes that the storm caused by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) ban on the supply of U.S. sourced components to the Chinese telecommunications company will blow over soon. “As a result of the Denial Order, the major operating activities of the Company have ceased,” the company stated in an undated filing with local stock exchanges it posted on its website.

“As of now, the Company maintains sufficient cash and strictly adheres to its commercial obligations subject to compliance with laws and regulations. The Company and related parties are actively communicating with the relevant U.S. government departments in order to facilitate the modification or reversal of the Denial Order by the U.S. government and forge a positive outcome in the development of the matters,” the filing continues. The document is credited to Yin Yimin, ZTEchairman, on behalf of the company’s board. The company stated in an earlier exchange filing that it had formally submitted a request to the BIS to stay the ban, as well as provided what it called "supplemental information in response to the Denial Order according to the instructions of BIS."

The filing comes after ZTE acknowledged April 23 that the ban, which the BIS enacted April 16, could have significant repercussions on the company's operations (see “ZTE: Commerce ban could 'severely impact the survival and development' of company”). ZTE’s problems come as trade relations between the U.S. and China worsen, and U.S. politicians express fears that use of communications technology purchased from the company or from fellow Chinese supplier Huawei poses a security risk (see, for example, "FCC's Pai proposes ban on USF use on 'national security threats'"). In another post on the company website, ZTE raised the possibility that the BIS action is part of a U.S. strategy to pressure China on the trade front. “ZTE responded quickly and expressed its firm opposition to the decision made by the US Department of Commerce, to the unfair and unreasonable punishment, and to making a trade issue as a political one,” the statement reads.

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